COLA, Raise Are Two Separate Things

The annual COLA announcement always sets off a round of confusion in the federal community involving raises and COLAs. The COLA goes to those who are retired, and is an automatic adjustment linked to a consumer price index. The raise goes to those who are active employees and is determined through the congressional budget process. For 2007, it appears almost certain that the raise will be either 2.7 or 2.2 percent. The raise is in part linked to the employment cost index, which is a measure of private sector wage growth—not living costs—and that is based on a different measuring period than the CPI figure used for the COLA. The raise and the COLA adjustments do not directly affect each other. However, there is often confusion on that point, in part because many employees refer to their raises as COLAs (and some retirees refer to their COLAs as raises).